Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

Frida Berrigan, columnist for Foreign Policy in Focus, discusses the frantic U.S. defense contractors lobbying for stimulus money while promising job creation, the prospect of a militarized outer space, Lockheed Martin’s overpriced and unnecessary F-22 Raptor and why the commonly held assumption that World War II ended the Great Depression must be challenged.

Frida Berrigan is Senior Program Associate for the Arms and Security Initiative at the New America Foundation. She is a columnist for Foreign Policy in Focus and a contributing editor of In These Times magazine.

The difference between weapons spending and domestic spending was laid out very clearly in Eisenhower’s farewell speach as well as his ominous warning about the future.
A real investment program that would require jobs, jobs that have been exported for over twenty years, and that would furnish wealth not just money, has nothing in common with a military budget that goes boom and suprise, there is nothing left, or is rapidly obsolete, scrapped and replaced.

I’ve yet to read any convincing articles regarding WWII and the Great Depression. The articles I’ve come across have been written by Austrian ideologues. I’ve also never seen an honest debate between these revisionists and the defenders of the status quo.

Why don’t we, once and for all, refer to the Bush tax cuts as bribes ? A sort of reverse campaign contribution, wherein the president, acting as a donor, gives cash gifts to a constituency for it’s pledge to re-elect him. Or he could give out “defence” contracts , because as your guest has pointed out, the weapons industries have “politically engineered” their production facilities throughout the land and employ tens of thousands. This redistribution of tax revenue benefits who , exactly ? The machinists, airframe mechanics, electricians and draftsmen, who design and assemble these “weapons platforms” or the shareholders and executives of Boeing or Northrup Grumman ? Trouble is, you can’t eat an F-22.

Let me say up front that I am all in favour of less war and massive cuts in military spending. And rationalising wars as a good idea because they are ‘good for the economy’ is pure obscenity.

But I believe the example of WWII needs substantial qualification. While much of the spending on the war was ultimately wasteful, in terms of the destruction and death it unleashed, for the US economy at least it also hugely boosted overall activity and created a massive industrial infrastructure that largely turned from ‘swords to ploughshares’ once the war ended.

I don’t think it is unreasonable to propose that the massive spending and unprecedented escalation of production in WWII shook off the last vestiges of the Great Depression. However, that does not justify war on economic principles. Imagine how that economic boom could have been magnified had the war’s death, destruction and utter waste of resources been taken out of the equation.

WWII “ended” the great depression in the US for one simple reason. In 1946 the US was the only major economic/industrial power left in the world. The major industry of Europe and Asia lay in ruins. An entire generation of Japanese, Russian, and German factory workers lay dead. What was not destroyed soon found itself behind the Iron Curtain and removed from the world market.

When the world went to rebuild, there was only one nation that could supply the factories and engineers needed. A boom under such conditions is inevitable. Government had nothing to do with it, except for creating the death and destruction that lead to such demand.

Such an event, where the US is at war but isolated from the effects of it, will not happen again. The nuclear age makes sure of that.

“The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie, therefore, produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable.”

I’d like to coin a term. The depression the world is currently spinning into is not an ordinary downturn in the slightest. It is, in fact, a “Marxian Depression.”

What does that mean? Marx postulated in the late 19th century that the “capitalist system” has fundamental “contradictions.” By “contradictions,” he meant that certain things which must take place for capitalism to function in the near term undermine the existence of capitalism in the long term. In other words, nothing lasts forever, and we can identify certain processes which will eventually result in the end of capitalism.

The root cause of this current economic downturn is that the “contradictions” of capitalism are now, for the first time in human history, greater than the opposing forces which keep capitalism healthy.

In plain English, soon, workers won’t be needed anymore.

The most important contradiction of capitalism Marx described is that increases in productivity undercut production. In other words, “efficiency” undercuts “demand.” Think about it. Imagine you own a pizza shop, and someone invents a new technology that allows you to make twice as many pizzas as you do now, for the same cost. What would you do? Would you make twice as many pizzas? No, you probably wouldn’t, because you don’t have customers for all those extra pizzas. Would you cut your workforce in half and produce the same number of pizzas, but at a new, lower price, and undersell your competition?

You probably would.

Now, let’s imagine that everyone in the world gets a device which allows them to produce twice as much with the same amount of work. It sounds great, but how would the economy respond? All companies would reduce their payroll and also lower their prices. Goods would then be more affordable for the people who still have jobs. However, unemployment would also rise considerably. Laid off workers would find new, lower paying jobs which hadn’t been eliminated by the magical productivity machines. These jobs would likely the in the service sector, which is somewhat resistant to increasing productivity.

Doesn’t this sound like what’s been happening in your town or city?

The thing is, a magical productivity machine has been invented. It’s called the computer. It’s also called the sweatshop. The twin forces of economic globalization and the technological revolution made possible by computing have allowed for massive gains in “productivity.”

To realize why this means a death-spiral for capitalism, imagine it’s five years in the future. In 2009, t-shirts can be made on a fully automated assembly line (and some are), but t-shirts made by sweatshop workers are of noticeably higher quality. In 2014, t-shirts made by robots are of comparable quality to those made by humans, and slightly cheaper. In 2009, millions are employed transporting goods around the world. In 2014, ships, loading docks and even 16 wheeler trucks have been invented which are navigated by computers and GPS as reliably as by human drivers, and for slightly less money. You could go on and on. The problem is, as fewer humans are needed as workers, fewer wages are paid, and although productivity rises, “effective demand” shrinks.

What we’re seeing today is the sudden invalidation of “Say’s Law.”

quote:
Say’s Law or Say’s Law of Markets is a principle attributed to French businessman and economist Jean-Baptiste Say (1767-1832) stating that production, or supply, inherently creates demand for what is produced.

Production is no longer creating a demand for what is produced. Machines can produce efficiently and quickly, but they can’t buy products. Farmers can produce more than enough food to feed everyone, but meanwhile hungry people can’t get money to buy the food and farmers can’t get loans to maintain production. Factories can produce enough clothing for everyone, but destitute people don’t have the money to buy sufficient clothing, and clothing companies are going bankrupt for lack of funds. More than enough housing exists for everyone, but people can’t find the money to pay for the houses they already have, causing foreclosed houses to rot to nothing as people go homeless for lack of money. These trends will continue, and the ranks of the ex-proletariat will continue to expand and grow more desperate.

There are only two solutions to this state of affairs. The first is that everyone who is not a capitalist will die. This is one logical outcome, which could prolong, for a time, the contradictions of capitalism.

However, Marx was an optimist, and imagined that at least a portion of the ex-proletariat would prefer to die fighting than to die from poverty or culling. He predicted that the ranks of the ex-proletariat would grow as the ranks of the capitalists shrank, resulting inevitably in the overthrow of the capitalist system.

Marx hoped that the proletariat would rise up by choice and overthrow capitalism voluntarily, rather than wait for the final necessity. However, Marx also predicted that the final necessity would nevertheless come. Capitalism is dying and will die, even if all of society were to try to save it, because as workers become obsolete, so do markets and so does capitalism.

What is the solution? Clearly, the problem is that demand is falling off, causing corporations to go broke, just as real people go hungry or without shelter for lack of funds. The solution is as simple as it is obvious; free money distributed to either the poorest or to all citizens. In other words, the fruits of productivity increases have to be socialized (shared), to offset the fall in demand they cause. Doing this is what’s known as “socialism.”

Clearly, the power to artificially stimulate demand is an awesome one, and the movement for it can only safely come from below, and the practice of it can only be beneficially realized through direct democratic processes. The alternative is a mass culling of humanity in order to prolong the capitalist system, as some government figures and seemingly some in the environmental movement would support. This is what is meant by the saying that we are faced with a choice of either socialism or barbarism.

“We stand today … before the awful proposition: either the triumph of imperialism and the destruction of all culture, and, as in ancient Rome, depopulation, desolation, degeneration, a vast cemetery; or, the victory of socialism.”

The realignment of “effective demand;” the ability to pay, with “real demand,” or real human needs, is no longer a pleasant hypothetical choice for humanity. It is quickly becoming the prerequisite for our very survival. Computing power is increasing at an exponential pace, and will inevitably be followed by increases in automation and production. A physicist once said that the single greatest failing of humanity is our inability to understand an exponential curve.

The only question before us is how bad we’ll let things get before we revolt.

I do think WW II restarted the economy. Not by the spending and make-work killing each other off, but by the destruction of the factories all over the world. Also the decay and destruction of property that happens when you ignore it while you go off bombing things, and the cities that need to be rebuilt.

Like “Not a Marxist,” I think Marx had this right. He noticed that “crises of overproduction” (depressions, like what we’re in now), are resolved by destruction of productive capacity through war, so the capitalists can start over again. I’m afraid this time, the scale of destruction will have to be even larger than WWII, to get the system going again.

Marx was a genius at describing the problem – it’s just that his solutions haven’t worked. Perhaps we can come up with better ones now.

In a free market capitalist system, increased productivity due to capital investment does indeed cause workers to lose their jobs. But your analysis does not account for the fact that we live in a world of scarcity. When our highest-level wants are satisfied, then we seek to satisfy our wants at the next-lower level. When those pizza workers get laid off, they are free to use their labor in enterprises designed to satisfy consumer demand at lower levels. As long as markets are free with no barriers to entry for new enterprises, the system works and everyone is eventually employed.

The current crisis is not due to capitalism. It is due to central planning of the credit market by the monetary policy of our central bank, the Federal Reserve. We have not had a free market capitalist system since the Fed was established in 1917.